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McMurtry Investment Report – Portfolios (April 2017)
|Cash||EQ Bank – High Interest Savings (2.0% current rate)||EQ Bank – High Interest Savings (2.0% current rate)|
|Bonds||iShares XSB Short Term||iShares XSB Short Term|
|iShares XFR Floating Rate||iShares XFR Floating Rate|
|iShares CBO 1-5 Ladder Corp||iShares CBO 1-5 Ladder Corp|
|iShares CLF 1-5 Ladder Gov’t||iShares CLF 1-5 Ladder Gov’t|
|Preferreds||Security||Dividend Yield %||Security||Dividend Yield %|
|Enbridge Pfd V Enb.pr.V US||4.19||Enbridge Pfd V Enb.pr.V US||4.19|
|Horizons Active Mgt. Pfd HPR||4.07||Horizons Active Mgt. Pfd HPR||4.07|
|Common Stocks||Security||Dividend Yield %||Security||Dividend Yield %|
|Financials||Royal Bank RY||3.59||Royal Bank RY||3.59|
|Sun Life SLF||3.46||Sun Life SLF||3.46|
|JP Morgan JPM US||2.28||JP Morgan JPM US||2.28|
|Bank of America BAC US||1.27||Bank of America BAC US||1.27|
|Manulife MFC||3.22||Manulife MFC||3.22|
|T. Rowe Price TROW US||3.35||T. Rowe Price TROW US||3.35|
|Firm Capital FC||6.71||Visa V US||0.75|
|First Data FD US||0.00|
|Energy||Freehold FRU||4.45||Freehold FRU||4.45|
|Whitecap WCP||2.70||Whitecap WCP||2.70|
|Torc TOG||3.51||Torc TOG||3.51|
|Pembina Pipe Lines PPL||4.56||Pembina Pipe Lines PPL||4.56|
|Inter Pipeline IPL||5.78||Spartan SPE||0.00|
|Materials||Agnico Eagle AEM||0.96||Agnico Eagle AEM||0.96|
|Franco Nevada FN||1.35||Franco Nevada FN||1.35|
|HudBay Minerals HBM||0.23|
|Trevali Mining TV||0.00|
|Industrials||New Flyer Ind. NFI||1.94||New Flyer Ind NFI||1.94|
|WSP Global WSP||3.19||WSP Global WSP||3.19|
|Canadian Pacific CP||1.02||Canadian Pacific CP||1.02|
|General Dynamics GD US||1.79||General Dynamics GD US||1.79|
|ZCL Composites ZCL||3.49|
|Consumer Discretionary||Home Depot HD US||2.42||Home Depot HD US||2.42|
|Sleep Canada ZZZ||1.85||Sleep Canada ZZZ||1.85|
|Stanley Black and Decker SWK US||1.75||Stanley Black and Decker SWK US||1.75|
|Telecom||BCE BCE||4.45||BCE BCE||4.45|
|Rogers B RCI.B||3.27||Rogers B RCI.B||3.27|
|Consumer Staples||Alimentation Couche Tard ATD.b||0.60||Alimentation Couche Tard ATD.b||0.60|
|Loblaws L||1.44||Loblaws L||1.44|
|Pepsico PEP US||2.69||Pepsico PEP US||2.69|
|Kraft Heinz KHC US||2.64||Kraft Heinz KHC US||2.64|
|Technology||Apple AAPL US||1.59||Apple AAPL US||1.59|
|Microsoft MSFT US||2.37||Microsoft MSFT US||2.37|
|Cisco CSCO US||3.43||Shopify SH||0.00|
|Facebook FB US||0.00|
|Alphabet GOOGL US||0.00|
|Utilities||Fortis FTS||3.63||Fortis FTS||3.63|
|Healthcare||AmerisourceBergen ABC US||1.65||AmerisourceBergen ABC US||1.65|
|Johnson & Johnson JNJ US||2.57||Johnson & Johnson JNJ US||2.57|
|Walgreen Boots WBA US||1.81||Walgreen Boots WBA US||1.81|
|Universal Health Services UHS US||0.32||Universal Health Services UHS US||0.32|
|Merck MRK||2.96||Merck MRK||2.96|
|CVS CVS US||2.55||CVS CVS US||2.55|
|IBB Biotech ETF IBB US||0.22|
|Real Estate||Cdn Apt. REIT CAR.un||3.85||Cdn. Apt. REIT CAR.un||3.85|
|Chartwell REIT CSH.un||3.60||Chartwell REIT CSH.un||3.60|
|Pure Industrial AAR.un||5.12||Pure Industrial AAR.un||5.12|
|European Equity||BMO European ETF ZEQ||1.91||BMO European ETF ZEQ||1.91|
|Emerging Markets||Horizons Active Emerg. Mkts HAJ||1.84||Horizons Active Emerg. Mkts HAJ||1.84|
April 2017 Investment Commentary for Income and Growth Portfolios
As a result of the failed repeal of Obamacare and an increased probability of the proposed tax cuts and regulatory changes taking much longer to be implemented, I am advising generating 5% more cash for each portfolio.
US equity markets are currently trading at 17-18 times forward earnings, yet the earnings growth rate is somewhere in the vicinity of 6-8%.
Thus the markets are expensive with the valuation largely predicated on the tax cuts and other pro-growth policies being implemented in 2017.
In addition, interest rates are moving up in the US, causing some headwinds for equity and bond markets.
However, any market correction of up to 10% should be viewed as a buying opportunity in this current economic environment. Economic growth is improving and the likelihood of a recession in the near future is remote, unless Trump makes a major faux pas with China.
I remain overweight Financials, Industrials, Consumer Discretionary and Technology. I did reduce my weight somewhat in the Financials based on their recent share price strength.
I remain underweight Energy, Materials, Telecom, Consumer Staples, Utilities and Real Estate. However, I did increase the Utilities weight as a result of these companies’ strong profit and dividend growth prospects, helping to partially offset interest rate increases.
I remain market weight Healthcare.
I am adding Enbridge Preferred V, a rate reset preferred that trades only in the US. It has a nice yield over 4% in US $ and still is eligible for the Canadian dividend tax credit. The reset feature matures in a little over a year at the 5 year US Treasury bond yield plus 3.14% spread. The rate reset feature means that this issue will benefit from rising rates. In addition, its US dollar settlement means investors will benefit holding it when the loonie declines vs. the US greenback.
I am also adding Horizons Actively managed Emerging Market Dividend ETF, symbol HAJ, that is sub advised by Guardian Capital. The fund does offer the capacity to currency hedge if need be. Emerging Markets are much cheaper than North American markets, yet offer strong upside.
I am advising a switch out of Mondelez into Kraft Heinz. Warren Buffet and his Berkshire Hathaway have invested in Kraft Heinz and recently unsuccessfully attempted to takeover Unilever. Kraft Heinz is a high-quality company that is very shareholder friendly and is interested in making accretive acquisitions.
In my mid-month blog, I switched out of TD Bank into Royal Bank, based on TD’s ongoing issues with allegations related to overselling their clients.
In another mid-month blog, I switched out of United Health Group into Universal Health Services. The failed repeal of Obamacare puts more pressure on the large insurers, but offers the advantage to the hospital management companies by continuing to insure the 30 million people that were formerly uninsured.
Lastly, I am adding Winpak, a solid competitor in the packaged goods area that offers good growth prospects.
McMurtry Investment Report – Sector Weights (April 2017)
|Equity Sector Weights (%)|
|Sector||My Weight||TSX Comp||S&P 500||50/50|
McMurtry Investment Report Asset Mix (April 2017)
|Asset Mix – Income and Growth Portfolios|